What are alternative investments?
Alternative investments are financial assets outside of conventional investments like stocks, bonds, and cash. Alternatives often have higher minimum investment requirements and fee structures, making them a strategy that is typically only accessible to high-net-worth investors.
Incorporating alternative investments into your investment strategy can have multiple benefits including:
- Increasing portfolio stability as alternative investments are not tied to the market
- Potential for higher returns
- Earning passive income (depending on the investment vehicle)
That said, alternative investments don’t come without their risk. Because most alternative investments are fairly illiquid, you gamble with the potential of not being able to sell them or acquire a fair valuation.
In addition, most alternative investments are not registered and therefore are not subject to the same reporting requirements placed on publicly traded investments. You should always conduct thorough due diligence when considering private placements.
Due to the inherent risk of alternative investment strategies, it is best to work with an established wealth management firm, like Avidian Wealth Solutions, that has experience helping high-net-worth investors successfully diversify their portfolios with alternative investments. With a good risk management strategy and advice from a fiduciary wealth manager, alternative investments can provide a stable way to meet your long-term financial goals.
Some alternative investment vehicles we may recommend include:
Hedge funds are pools of money that seek to invest in publicly traded securities across global markets. This investment vehicle can be highly risky as investors may opt to use borrowed funds with the hopes of a higher return.
Managed future funds attempt to maximize the potential of rising and falling trends in markets such as finances and commodities. This type of alternative investment vehicle can see higher returns during market declines, making them appealing to investors.
Private capital is an umbrella term that includes any equity investments in private companies that can later be sold off for a profit. This could look like buying out a failing business and restructuring it or investing in a startup with strong potential.
Real estate, including farmland, arts, and antiques, is typically accessible to all investors unlike some of the above vehicles that are only available for those with high minimum investments. These assets typically offer a hedge against inflation and are not dependent on the performance of the market.
Inflation has been a serious concern for today’s investors making tangible assets like commodities, or any economic good such as gold, grain, oil, and natural gas, appealing. The goal with commodities is to buy them at a low price and sell them when they’ve appreciated in value.